M/s. Pipal Solutions (India) Pvt. Ltd., Delhi V. ACIT, New Delhi

ITA 450/DEL/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6940 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 13-07-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V R SONBHADRA
• Assessee Lawyers: B N GOSWAMY
• Keywords: Income from undisclosed sources; Competent authority
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH F NEW DELHI BEFORE : SHRI I.C. SUDHIR , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 450/DEL./2011 ASSTT. YEAR : 2003 - 04 PIPAL SOLUTIONS (INDIA) PVT. LTD., VS. A.C.I.T., CIRCLE 14(1), 208, ARVINDO PLACE, HAUZ KHAS, NEW DELHI DELHI (PAN: AABCP 9340C) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. B.N. GOSWAMY, ADVOCATE RESPONDENT BY : SH. V.R. SONBHADRA, SR. DR DATE OF HEAR ING : 13.07.2016 DATE OF PRONOUNCEMENT : 22 .07.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.11.2010 OF LD. CIT(A) - XVII, NEW DELHI FOR THE ASSESSMENT YEAR 2003 - 04 CHALLENGING THE PENALTY U/S. 271(1)(C) OF THE INCOME - TAX ACT ON THE FOLLOWING GROUNDS : 1. THAT THE AUTHORITY BELOW HAS GROSSLY ERRED IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS GROSSLY ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD VALID JURISDICTION FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961. THE INTERPRETATION PLACED ON THE JUDGMENT OF THE HON BLE SUPREME COURT IS COMPLETELY MISPLACED AND HAS NO APPLICATION IN THE FACTS OF THE APPELLANT CASE. ITA NO. 450/DEL./2011 2 3. THAT THE EXPLANATION OF THE APPELLANT IN REGARD TO THE NON APPLICABILITY OF PENALTY PROCEEDINGS IN THE CASE HAS BEEN BRUSHED ASIDE BY THE LEARNED APPELLATE AUTHORITY ON WHOLLY ERRONEOUS AND INSUFFICIENT GROUNDS. 4. THAT THE AUTHORITY BELOW HAS GROSSLY ERRED IN NOT EVEN CONSIDERING THE RULING, RELIED ON BY THE APPELLANT IN WRITTEN SUBMISSIONS FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 5. THAT THE ORDERS OF THE AUTHORITIES BELOW ARE AGAINST LAW AN D FACTS OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS MADE U/S. 143(3) OF THE ACT ON 13.03.2006 AT NET LOSS OF RS.1,35,26,352/ - AS AGAINST RS.1,59,36,350/ - DECLARED BY ASSESSEE IN ITS RETURN OF INCOME FILED ON 02.12.2003. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD RECEIVED A LOAN OF RS.14,00,000/ - FROM ONE SHRI NAND D. KAPADIA. THE AO ASKED THE ASSESSEE TO JUSTIFY THE GENUINENES S OF LOAN BY FURNISHING THE CONFIRMATIONS ETC. WITH RESPECT THERETO. BUT THE ASSESSEE DID NOT FURNISH THE SAME BEFORE THE AO, RATHER, STATED VIDE ITS LETTER DATED 10.03.2006 THAT WHEREABOUTS OF MR. KAPADIA IS NOT KNOWN TO IT AND OFFERED SUM OF RS.14,00,00 0/ - AS INCOME FOR TAXATION. ACCORDINGLY, THE AO TREATED THIS SUM OF RS.14,00,000/ - AS ASSESSEE S INCOME FROM UNDISCLOSED SOURCES AND ADDED THE SAME TO THE RETURNED INCOME VIDE ASSESSMENT ORDER DATED 13.03.2006. THE FIRST APPEAL AGAINST THIS ORDER ALSO STOO D DISMISSED VIDE ORDER DATED 11.09.2007. THE ASSESSING OFFICER ITA NO. 450/DEL./2011 3 INITIATED PENALTY PROCEEDINGS BY ISSUING NOTICE U /S. 271(1)(C) READ WITH SECTION 274 OF THE ACT ON 13.03.2006 . IN THE MEAN TIME, THE JURISDICTION OVER THE CASE OF ASSESSEE STOOD TRANSFERRED TO ACIT, CC - 5, NEW DELHI U/S. 127 VIDE ORDER DATED 07.02.2007 FROM THE PRESENT ASSESSING OFFICER. HOWEVER, THE PRESENT ASSESSING OFFICER, F INDING THE REPLY OF THE ASSESSEE AS UNSATISFACTORY, IMPOSED MINIMUM PENALTY OF RS.5,14,000/ - U/S. 271(1)(C) OF THE ACT VIDE ORDER DATED 31.03.2009. THE ASSESSEE CARRIED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY IN APPEAL, WHERE THE PENALTY ORDER HAS BEEN CONFIRMED VIDE IMPUGNED ORDER. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 3 . DURING THE COURSE OF HEARING, THE LD. AR SUBMITTED THAT THE JURISDICTION OF THE ASSESSING OFFICER IMPOSING PENALTY WAS CHALLENGED BEFORE THE LD. CIT(A), INTER ALIA, STATING THAT THE CASE OF THE APPELLANT WAS TRANSFERRED BY THE CIT, DELHI - V TO ACIT, CENTR AL CIRCLE - 5 VIDE ORDER DATED 07.02.2007. THEREFORE, THE PENALTY ORDER PASSED BY ACIT, CIRCLE 14(1) IS WITHOUT JURISDICTION AND IS LIABLE TO BE QUASHED UNDER LAW. HOWEVER, THE LD. CIT(A) WITHOUT CONSIDERING THE STAND OF APPELLANT IN RIGHT PERSPECTIVE, GROSS LY ERRED IN HOLDING THAT THE ASSESSING OFFICER HAD VALID JURISDICTION FOR LEVY OF PENALTY BY PLACING RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF VARKEY CHAKO VS. CIT, ITA NO. 450/DEL./2011 4 203 ITR 885 (SC). THE RELIANCE PLACED ON THIS DECISION IS COMPLETELY MISPLACED, BEING NOT APPLICABLE TO THE PRESENT CASE. IT WAS SUBMITTED THAT THE PENALTY ORDER HAS BEEN PASSED ON 31.03.2009, WHEREAS THE CASE STOOD TRANSFERRED TO ANOTHER JURISDICTION MUCH BEFORE ON 07.02.2007. IT IS ALSO SUBMITTED THAT ON MERITS ALSO THE LD. CIT(A) HAS ERRED IN NOT PROPERLY CONSIDERING THE CONTENTION OF THE ASSESSEE THAT THE APPELLANT HAD LOSSES OF RS.1,59,26,352/ - AND DID NOT HAVE ANY ADVANTAGE OF CARRY FORWARD AND THAT SINCE THE BUSINESS WAS CLOSED, THE AMOUNT OF IMPUGNED LOAN WAS SURRENDERED WITH THE UNDERSTANDING THAT NO PENALTY ACTION SHALL BE TAKEN AGAINST THE ASSESSEE. THE IMPUGNED LOAN WAS TAKEN THROUGH ACCOUNT PAYEE CHEQUE AND MERELY BECAUSE PRESENT WHEREABOUTS OF CREDITOR COULD NOT BE FOUND, IT COULD NOT BE SAID THAT THE APPELLANT HAD CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 4. THE LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SINCE THE APPELLANT FAILED TO SUBMIT THE CONFIRMATIONS ETC. BEFORE THE AO, AND THERE WAS NO VOLUNTARY SURRENDER AS IT WAS MADE ONLY WHEN THE ASSESSEE WAS CORNERED, THE ORDERS IMPOSING PENALTY NEED NO INTERFERENCE. IT WAS ALSO SUBMITTED THAT THE POINT OF JURISDICTION HAS ITA NO. 450/DEL./2011 5 BEEN WELL DECIDED BY THE FIRST APPELLATE AUTHORITY BASED ON THE DECISION OF HON BLE SUPREME COURT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. FIRST WE ADDRESS THE LEGAL ASPECT OF THE CASE PERTAINING TO JURISDICTION OF THE ASSESSING OFFICER. A PERUSAL OF THE IMPUGNED ORDER REVEALS THAT ON THE POINT OF JURISDICTION, THE LD. CIT(A) CALLED FOR REMAND REPORT FROM THE AO, WHO FURNISHED THE SAME VIDE LETTER DATED 15.11.2010, WHEREIN T HE AO HAS REMARKED THAT HAD THE ASSESSEE INFORMED THE UNDERSIGNED AT THE TIME OF PENALTY PROCEEDINGS THAT ITS CASE HAS BEEN TRANSFERRED TO THE ACIT, CENTRAL CIRCLE - 5, NEW DELHI, THE PENALTY PROCEEDINGS WOULD HAVE BEEN TRANSFERRED TO THE CONCERNED AO WELL IN TIME FOR NECESSARY ACTION AT HIS END . THIS COMMENT CLEARLY IMPLIES THAT THE AO ITSELF ADMITS THAT THE CORRECT JURISDICTION OVER THE CASE OF THE ASSESSEE WAS WITH ACIT, CENTRAL CIRCLE - 5, BUT THE PENALTY PROCEEDINGS WERE NOT TRANSFERRED TO THE AUTHORITY HAVING CORRECT JURISDICTION ONLY BECAUSE THE ASSESSEE DID NOT INFORM THE FACT OF TRANSFER OF CASE IN THE PENALTY PROCEEDINGS. SUCH AN APPROACH OF THE ASSESSING OFFICER IS NOT APPRECIABLE FOR THE REASON PENALTY ORDER HAS BEEN PASSED ON 31.03.2009, WHEREAS T HE CASE STOOD TRANSFERRED TO ANOTHER JURISDICTION MUCH BEFORE ON 07.02.2007, I.E. ABOUT TWO YEARS BEFORE CONCLUSION OF PENALTY PROCEEDINGS AND DURING SUCH A LONG PERIOD THE AO ITSELF SHOULD BE AWARE OF ITA NO. 450/DEL./2011 6 THE FACTUM OF TRANSFER OF CASE. IT APPEARS TO BE THE S YSTEM FAILURE ON THE PART OF THE REVENUE AUTHORITIES, PARTICULARLY WHEN THE ASSESSEE EXPLAINED BEFORE THE CIT(A) THAT IT CAME TO KNOW THE FACT OF TRANSFER FOR THE FIRST TIME WHEN A NOTICE U/S. 148 FOR AY 2002 - 03 DATED 30.03.2009 WAS SERVED ON THE ASSESSEE ON 02.04.2009. IN FACT, ALL PROCEEDINGS STOOD TRANSFERRED TO THE NEW INCUMBENT BY VIRTUE OF TRANSFER ORDER, AS CONTEMPLATED BY EXPLANATION TO SECTION 127 OF THE IT ACT. THE LD. CIT(A) HAS FAILED TO CONSIDER ALL THESE FACTS IN THE IMPUGNED ORDER. THE LD. C IT(A) WHILE HOLDING THAT THE AO HAD VALID JURISDICTION , HAS RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF VARKEY CHACKO (SUPRA), WHICH IN OUR OPINION IS NOT APPLICABLE TO THE PRESENT CASE. IT APPEARS THAT THE LD. CIT(A) HAS NOT GONE THRO UGH THE ENTIRE OBSERVATIONS OF HON BLE SUPREME COURT IN RIGHT PERSPECTIVE. THE RELEVANT OBSERVATIONS OF THE HON BLE COURT READ AS UNDER : A PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME CAN BE IMPOSED ONLY WHEN THE ASSESSING AUTHORITY IS SATISFIED THAT THERE HAS BEEN SUCH CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. A PENALTY PROCEEDING, THEREFORE, CAN BE INITIATED ONLY AFTER AN ASSESSMENT ORDER HAS BEEN MADE WHICH FINDS SUCH CONCEALMENT OR FURN ISHING OF INACCURATE PARTICULARS. WHO AT THIS POINT OF TIME HAS THE AUTHORITY TO IMPOSE THE PENALTY IS WHAT IS RELEVANT. WHOEVER THIS AUTHORITY MAY BE, HE IS OBLIGED TO IMPOSE SUCH PENALTY AS WAS PERMISSIBLE UNDER THE LAW IN THAT BEHALF ON THE DATE ON WHIC H THE OFFENCE OF CONCEALMENT OF INCOME WAS COMMITTED, THAT IS TO SAY, ON THE DATE OF THE OFFENDING RETURN. THE TWO ASPECTS MUST FIRMLY BE BORNE IN MIND, NAMELY, WHO MAY IMPOSE THE PENALTY AND IN WHAT MEASURE. IN THE INSTANT CASE, WHEN THE ITO REACHED THE S ATISFACTION THAT THE ASSESSEE HAD CONCEALED INCOME AND MADE THE ASSESSMENT ORDER ON 27TH MARCH, 1972, THE AMENDED PROVISIONS OF S. 274(2) WERE IN OPERATION AND THEY ITA NO. 450/DEL./2011 7 ENTITLED THE ITO TO IMPOSE PENALTY IN CASES WHERE THE AMOUNT OF INCOME IN RESPECT OF WHICH PARTICULARS HAD BEEN CONCEALED WERE, AS HERE, LESS THAN RS. 25,000 . 6. FROM THE ABOVE OBSERVATIONS, IT IS CONSPICUOUS THA T IN THAT CASE NO QUESTION ABOUT NEW INCUMBENCY OF JURISDICTION IS INVOLVED AS IN THE PRESENT CASE, BUT THE QUESTION WHICH HAS BEEN DECIDED BY HON BLE APEX COURT WAS AS TO WHO WAS THE COMPETENT AUTHORITY TO DECIDE THE PENALTY PROCEEDINGS WHETHER ITO OR IAC IN TERMS OF AMENDED PROVISIONS OF SECTION 274(2). SUCH FACTS ARE NOT HERE IN THE PRESENT CASE. WE, THEREFORE, FIND THAT THE LD. C IT(A) HAS ERRED IN HOLDING THAT THE AO WAS HAVING VALID JURISDICTION OVER THE CASE OF ASSESSEE IN THE INSTANT CASE. IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE PENALTY ORDER WAS WITHOUT JURISDICTION AND IS LIABLE TO BE QUASHED UND ER LAW. ACCORDINGLY, THE APPEAL OF THE ASSESSEE HAS TO BE ALLOWED ON THIS LEGAL GROUND. SINCE THE PENALTY ORDER STANDS QUASHED ON LEGAL ASPECT OF THE CASE, WE NEED NOT TO ENTER INTO OTHER GROUNDS OF APPEAL ON MERITS. 7. IN THE RESULT, THE APPEAL OF THE AS SESSEE IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22.07.2016 . SD/ - SD/ - ( I.C. SUDHIR ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 22.07.2016 *AKS/ -